The yuan fell on Thursday morning after China’s central bank set its mid-price lower for the ninth day running, as it dropped to its weakest level in 19 months.

Traders were focused on the US, where stocks fell, and whether officials there will brand the Chinese as currency manipulators by weakening the yuan as a weapon to fight against the impact of the ongoing trade war between the nations.

Offshore yuan traded by international investors dropped 0.23 per cent to 6.9407 to the US dollar in early trade, while onshore yuan traded by the mainland traders fell 0.13 per cent to 6.9242.

The mid-price was 6.9098, its lowest since March 15, 2017.

The yuan is not yet freely convertible and traders can only trade up to two per cent in each direction of the mid-price set every morning by the PBOC. The lower level of the mid-price is generally seen to be pointing the direction of the market.

“Stock markets fell sharply last night, led by the US,” said Jasper Lo, chief investment strategies at Eddid Securities and Futures.

“The market is now focused on whether the US will add China to its list of currency manipulators. There are some US officials expressing concerns over the yuan’s depreciation and wondering if China wants to use a weaker yuan to offset the impact of the ongoing trade war,” he said.

The market is now focused on whether the US will add China to its list of currency manipulators. There are some US officials expressing concerns over the yuan’s depreciation and wondering if China wants to use a weaker yuan to offset the impact of the ongoing trade war

US Treasury Secretary Steven Mnuchin told the Financial Times that the US is monitoring currency issues “very carefully” while some investment banks are now wondering whether the Chinese currency will stay below 7 against the US dollar. That would be its lowest since China adopted the new currency exchange system in 2005.

Lo, however, added he believed that China would not let the yuan drop below that threshold.

“While a weaker yuan would help exports and reduce the impact of trade tariffs imposed by the US on Chinese goods, it would lead to more capital outflow problems. It could also lead to further volatility in mainland Chinese stock exchanges and those across the region,” Lo said.

“Traders do expect the PBOC to take action to defend the yuan from falling closer to 7 yuan per dollar.”